D.C. Circuit Rejects All NAB and Sinclair Arguments Against Auction Order

The U.S. Court of Appeals for the D.C. Circuit utterly rejected all arguments by NAB and Sinclair Broadcast in their petitions against the FCC's Incentive Auction Report and Order, in an opinion written by Judge Sri Srinivasan and issued Friday.

None of the arguments against the 39-month repacking deadline, the commission’s determination of station coverage area or use of TVStudy software instead of the previous OET-69 technology overcame the court’s obligation to defer to the FCC on matters within its purview, Srinivasan said. “The Commission reasonably exercised its discretion in concluding that a prohibition against any reassignments carrying a risk of terrain loss would unduly limit its flexibility in connection with the reverse auction and repacking process,” the opinion said. NAB and Sinclair issued statements expressing disappointment with the ruling. The court’s opinion “fails to hold the FCC to the letter of the law passed by Congress,” NAB said. Both Sinclair and NAB also said they would work with policymakers to protect broadcast interests.

“This decision provides the Commission and all stakeholders with the certainty necessary to proceed apace toward a successful auction in the first quarter of next year,” said FCC Chairman Tom Wheeler in a statement. Also on the incentive auction, Wheeler indicated Thursday he will seek a vote at the June 18 FCC meeting on an order that rejects nearly all requests for reconsideration on the service rules for the auction. The order was circulated by Wheeler last month (see 1505060069) and putting it on the agenda is a move aimed at forcing all of the commissioners to vote the item, FCC officials said Friday.

Despite the FCC’s commanding win, the decision is unlikely to deter future court challenges to the incentive auction order, several broadcast attorneys told us. Future challenges on the matters addressed in this case are unlikely, but the repacking and other aspects of the auction involve a host of issues that could create difficulties for broadcasters and others, and thus spawn future court battles, they said. “Every appeal is considered on its own merits," said Wilkinson Barker broadcast attorney Jonathan Cohen. The failure to protect fill-in translators in the auction -- which Srinivasan said was within the FCC’s discretion -- could lead to “real problems” for broadcasters, said Rini O’Neil broadcast attorney David O’Neil. NAB and Sinclair also have the option to appeal the case en banc at the appeals court or to the Supreme Court, though many broadcast attorneys told us that was unlikely to happen or succeed. At this late stage, any further litigation against the auction would likely lead to a delay for the auction, even with expedited court schedules, several broadcast attorneys told us.

The decision could lead to a speedier resolution of any negotiations between broadcasters and the FCC over aspects of the repacking, broadcast attorneys and a former FCC official told us. NAB has been seen as trying to work with the FCC on issues such as the relocation fund, industry officials told us, and the court decision could improve the FCC’s leverage in the matter. But the FCC will likely temper its use of that advantage, because it needs broadcaster participation to make the auction work, broadcast attorneys told us. “The FCC, broadcasters, and the wireless community must continue working together to make this auction a success,” said House Commerce Committee Chairman Fred Upton, R-Mich., and Communications and Technology Subcommittee Chairman Greg Walden, R-Ore., in a joint statement. “As the Spectrum Act intended, we need buy-in from all of these groups to ensure American spectrum needs are met without harming broadcasters’ ability to serve their communities.”

Srinivasan took particular aim at broadcaster arguments that the Spectrum Act restricted the FCC from using more accurate data, up-to-date census info, or improved software in the incentive auction. “The Spectrum Act aims to enhance the technological capacity of the United States,” Srinivasan said. “The Commission understandably declined to fulfill that forward-looking mandate by using obsolete software and inaccurate data. Petitioners’ insistence that the Commission do so runs counter to the statute’s basic objectives,” he said. It was “entirely permissible” under the Congressional directive that the commission “take all reasonable efforts” to preserve broadcaster coverage areas “for the Commission to take into account the Spectrum Act’s overarching objective of repurposing broadcast spectrum,” Srinivasan said.

Arguments that the FCC’s 39-month “go-dark” deadline for the repacking is unreasonable were similarly dismissed in the opinion. There was nothing arbitrary about the FCC combining the three-month period to apply for a construction permit and the 36-month period to transfer facilities to new channels to reach the 39-month total, Srinivasan said. Although Sinclair had argued that antenna and transmitter construction and installation industry shortages are likely to be created by the time crunch, Srinivasan deferred to the FCC’s prediction that those industries will ramp up in response. “The Commission expects service providers to respond to the surge in demand, a predictive judgment about a matter within its expertise to which we accord ‘substantial deference,’” Srinivasan said.

The D.C. Circuit also rejected arguments that the Spectrum Act required more than one broadcaster in each market to choose to sell its spectrum before an auction could be held. That interpretation would “prevent acquisition of adequate spectrum to allow the auction to close,” the court said. “We are unable to conclude that Congress intended to bring about such a result.”

Wireless industry officials, who view the incentive auction as key to making more low-band spectrum available for licensed use, were pleased with the D.C. circuit’s decision. “After the DC Circuit decision there are no more legal challenges to be expected,” Roger Entner, analyst at Recon Analytics, told us. “The only outside chance something would change is if the FCC would change the size of the set-aside.”

Steve Berry, president of the Competitive Carriers Association, whose group, CTIA and CEA intervened in support of the FCC, said in a news release, “The Court was right to hold that the FCC acted well within its legal authority to use updated software and data inputs for implementing the incentive auction ... This timely decision will help ensure there is no delay in the upcoming incentive auction, which is scheduled for early 2016.”

"Today’s decision by the D.C. Circuit is a decisive win for wireless consumers, as the court has affirmed the FCC’s Incentive Auction Order in whole,” CTIA President Meredith Baker said. CTIA looks forward to a “successful and timely incentive auction that delivers access to more spectrum as soon as possible to be able to meet ever increasing mobile broadband demand."

“The spectrum crunch the communications industry is facing is real,” said Scott Belcher, president of the Telecommunications Industry Association. “Making more spectrum available is critical to ensuring that wireless carriers and the [information and communications technology] industry can keep pace with the exploding pace of consumer demand for mobile broadband.”